The Crisis of 1973 and the Fall of Communism

The Crisis of 1973 and Its Consequences

In 1973, an economic crisis began that affected many countries.

Who?

The OPEC (Organization of Petroleum Exporting Countries), an organization to which several Arab countries belonged.

Why?

An attempt to pressure Western countries to convince Israel to abandon the Palestinian territories that had been occupied since the Yom Kippur War (1973).

What?

An embargo on the sale of oil. The price of oil tripled in Western countries and affected all sectors of production. The lack of crude oil led to an economic collapse.

Main Consequences:

• The uncontrolled rise of prices (inflation) caused by the increase in the price of oil.
• Reduction of demand.
• Many businesses had to close and unemployment grew.

Measures to Solve the Crisis

Some governments, such as the USA (Reagan) and Britain (Thatcher), adopted neoliberal policies:

1. Reduced the intervention of the state in the economy.
2. Privatized public companies.
3. Reduced public spending.
4. Reduced social services.
5. Made employment laws more flexible.
6. Reduced taxes.

Industrial Restructuring:

1. Traditional industrial sectors (coal, iron and steel, textiles, shipbuilding, automobile, construction) reduced production or modernized their technology.
2. New sectors of high technology were developed (computing, telecommunication, biotechnology, aerospace technology).
3. Factories were moved to new locations where production costs were cheaper.
4. A search for alternative energies began to reduce dependence on oil.

The Dissolution of the Communist Bloc (1982-1991)

Reforms in the Soviet Union

When Brezhnev died (1982), the USSR was suffering a political and economic crisis. Gorbachev implemented several reforms:

Perestroika, or “Reconstruction”

• A series of political and economic reforms.
• Recognition of different political parties and free elections.
• Acceptance of private enterprise and personal economic incentives.

These reforms opened the USSR up to modernity and reduced the intervention of the state.

Glasnost, or “Openness”

• Allowed freedom of speech, opinion, and the press.
• Tried to achieve transparency in politics.

These reforms were strongly opposed by:

• Traditional communists - they believed they would destroy the communist system.
• Radical reformers - they believed they did not go far enough.

The Fall of the European Communist Regimes

In 1989, the socialist republics in Europe (Poland, Hungary, Romania, Czechoslovakia, and Bulgaria) began a process of reform that ended communist systems.

• In 1993, Czechoslovakia divided into two separate states: the Czech Republic and Slovakia.
• In the German Democratic Republic, the Berlin Wall came down on 9 November 1989.
• A year later, on 3 October 1990, the reunification of Germany took place.

The Dissolution of the Soviet Union

1. In 1991, Gorbachev implemented reforms to decentralize the state.
2. Opposition from the Soviet military establishment (coup d'état).
3. The coup d'état was prevented by popular agitation led by Boris Yeltsin.
4. The process of reforms accelerated.
5. The Communist Party was banned.
6. The Baltic republics of Estonia, Lithuania, and Latvia were given independence.
7. Gorbachev resigned and the USSR dissolved.
8. The CIS (Commonwealth of Independent States) was founded, formed by the Russian Federation and eleven other republics.
9. In 1991, the Warsaw Pact was also dissolved and a difficult transition to democracy and a capitalist economy began.